Saturday, April 30, 2011

4/30 Weekly Commentary

Update Sunday afternoon.  I'm slowly getting cycles back and am starting to update charts.  My machines are still monopolized with cyclical baselines and I have to allow them to finish in order to reboot the configuration that I use to generate the normal data series. 

I began shorting at the close 4/19 and the market rallied for 6 more sessions.  I'm currently 4% SDS, 2% TWM, 2% QID, 1% SOPIX, and 1% UCPIX.   I put on the TWM and QID late so I'm OK there.
Over the past week the relative performance of DJI(+2.5%) has been striking vs. NDX(+.9%) and SPX(+1.9%).  Small caps will ordinarily outperform DJI by a handful, but just kept up this week and mid caps underperformed.  The Russell 2000 has come back up to it's 2007 highs for the nominal high at 860, but what I am counting as an irregular flat has slightly exceeded them.

I'm using the mid-caps for wave counts since they are clearer than the Russell but achieve the same outlook.  

The current rally is a c wave.
A close-up of the c wave.
The midcap count, if correct, should have wave (v) less than or equal to (iii) making the limit of the rally 1018.
SPX, while it could count complete, I'm labelling as 1 more high.
While I keep wave counts, I don't hang my hat on them but use them as guides within an existing strategy.  While raw I1 has developed an 8-day lead since the quake, this phenomena has occurred in the past.  Rather than using the lead, which signalled today as the peak, I am focusing on the 30-day I1 which has not been disturbed by short-term distortions in it's history.  The parallel with today's environment is 1987, where loose money and a declining dollar preceded the crash.
The current 30-day I1 chart peaked this week:
The 1987 30-day I1 chart will be posted here soon:

Here is the latest optimized cycle chart for DJI.  There are 2 things to consider when looking at these cycle charts:
1)  They make the past cycle highs and lows look good because the data is optimized to do so.
2)  They make big price lows generally coincide with big cycle lows.  We cannot infer that a medium-sized future cycle low will only correspond with a medium-sized price low.  It could be a big one!


  1. Steve,
    I had a question for you: I am sure you've seen so many "experts" refer to the March 2009 lows as "Generational Lows". What do you think the chances are we see lower than that before the end of this bear?

  2. Hi Steve.
    As always, I admire your conviction and guts in getting in short before the trend changes. I hope it works out for you.

    Here are 2 links I picked up recently, interesting reading you might enjoy:

  3. Steve,

    Are you still short silver? It's down 11 percent (a few minutes ago was down 13 percent), trading at 43.25.

    Looks like you may have called the top, at least in silver.

    Gold is down, but only 0.4 percent. Talk about the metals decoupling from each other! Sheesh!

  4. I hold 2% ZSL. I'm not short futures. Now if only the stock market would turn...

  5. Congrats on the ZSL. What a drop!

  6. Steve,
    Looks like more news tonight! Guess we know why the PM's are selling off hard.